Financial Reporting Council publishes new guidance on company meetings

The FRC published the Meetings Guidance on 21 July 2022. It follows the FRC's Guidance on AGM meetings, published in October 2020, which reviewed the different approaches taken by listed companies as they adapted to holding AGMs during the COVID-19 pandemic, including the transition to hybrid meetings. As part of its review, the FRC convened the AGM Stakeholder Group (comprising, amongst others, the GC100, Association of Investment Companies, BEIS and the UK Shareholders Association) to consider recommendations for legislative change and alternative ways to achieve flexibility whilst maintaining the integrity of AGMs, generally.

Enhancing shareholder engagement, participation and information

The FRC are clear that they see AGMs offering a valuable opportunity to relay to members the achievements of the company in the past year, to explain business performance, and provide for shareholder engagement through voting on various matters, such as the re-election of directors. However, compliance with the directors' duty to promote the success of the company for the benefit of stakeholders in section 172 of the Companies Act 2006 requires that directors have regard to wider stakeholder considerations. The FRC considers that effective and transparent shareholder involvement should extend beyond the AGM to all GMs – GMs should be viewed as key events as part of both an annual and a longer-term shareholder engagement strategy. Similarly, opportunities to update shareholders on company matters should be offered throughout the year, with the FRC citing Investor Relations Days, Capital Markets Days and similar stakeholder engagement events or presentations as ways of ensuring that boards provide their shareholders with access to similar information and maintain strong ties with their investors.

The Meetings Guidance encourages companies to embrace the use of new technologies to maximise shareholder engagement and outlines how they can do this, by running hybrid forms of meetings where shareholders can attend and vote either physically in person or remotely via an appropriate electronic platform. The FRC recognises that every company is different, and the Meetings Guidance ought to be applied with a degree of flexibility, depending on the individual circumstances of the company. In recognising the benefits of physical meetings, companies should consider the most suitable format for their meeting, outlining reasons for their choice in the relevant meeting notice. The FRC flags the continuing uncertainty as to whether the Companies Act 2006 permits virtual-only meetings due to the interpretation of the word 'place' in sections s.311(b) and s.360A: for now, it cautions companies planning to do so to give the matter careful consideration and obtain independent legal advice.

Principles of effective shareholder meetings

The Meetings Guidance sets out seven principles - each supported by practical advice and action points - to help companies ensure their meetings are well-run and provide constructive forums for shareholder participation:

(1) In advance of the meeting, the shareholders should receive clear instructions on how to attend and participate;

(2) Shareholders should be able to fully engage in the meeting, whether they are attending virtually or in person;

(3) The board should update the AGM with issues raised by different shareholder groups that materially impact the company's performance, strategy, and culture;

(4) The board should provide for broad access to, and for participation by, a diverse range of shareholders, allowing members to raise questions to the meeting agenda whether they attend in person or virtually;

(5) Shareholders should be able to vote in real time or by proxy in advance;

(6) Companies should be transparent as to the matters raised and discussed at the meeting; and

(7) Effective shareholder participation should extend beyond the AGM and opportunities to update shareholders should be offered throughout the year, with an emphasis on ensuring that all shareholders have access to similar information.

The FRC has stated that its Meetings Guidance will be kept under review going forwards, to ensure that meetings (in whatever form) continue to deliver effective outcomes for all parties concerned.